Makore Ltd is a public limited company trading in a number of markets. It sells electronic toys. Many of its customers are private limited companies.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2013). The mark or mark type is shown in brackets.

1. [2] (a) (i) Any two characteristics × 1 mark each – shares sold on stock exchanges; anyone may be a shareholder; shares are freely transferable; minimum number of directors is two; minimum share capital required to start business; must obtain a trading certificate before starting business; set up to raise large amounts of capital from the public; has Plc/Sa/Bhd after its name; any other relevant difference
2. [2] (a) (ii) Any two characteristics × 1 mark each – may be a small family business; ownership of shares is restricted; shares not transferable without consent of the other shareholders; minimum number of directors is one; may be set up as a way of expanding from a sole trader/partnership; has Pte/Pvt/Pty/Ltd after its name; any other relevant difference NB Answers must be distinct differences, not negatives of the other type of limited company.
3. [3] (b) Any three points × 1 mark each – responsibility for the debts of the business is limited to the amount of money they have invested; this protection means that potential shareholders are not deterred from investing as their personal property is not at risk even if losses amount to millions of dollars; they are therefore more willing to invest in limited companies rather than use their money for other purposes; any other relevant point
4. [4] (c) Any four points × 1 mark each or two well explained points × 2 marks – can earn increased revenue which may lead to greater profits; if one market is not doing well, this may be compensated for by other markets; enables the company to spread the risk of failure to sell its goods/obtain payment; may enable the company to sell particular toys in some markets and other toys in other markets as consumer tastes may vary; enables them to earn foreign currency that can be used to pay for imported components; may be able to take advantage of economies of scale + example; any other relevant point
5. [3] (d) (i) Any three reasons × 1 mark – expenses may have been lower than in previous years (any distinct examples e.g. lower wage costs - max 2 marks); cost of goods sold may have been lower than in previous years; some of their products may have been sold better than in previous years; some of their markets may have been more profitable; they may be selling in new markets which are profitable; they may be selling new electronic toys very successfully; some of the sales offices they already have, have performed well; any other relevant reason
6. [6] (d) (ii) Level 2 (4-6 marks) Has considered some of the three options, may have considered other options, and has given a reasoned recommendation. (If a candidate has given a reasoned recommendation relating to only one option, award 4 marks max.) In order to maintain the rise in profits Makore Ltd should consider offering more products. Electronic toys will go out of date very quickly as technology advances. In order to remain competitive, Makore Ltd will have to develop new products. These toys will have to be advertised if they are to sell. Otherwise consumers will not know about them. Mass media is likely to be used as the toys appeal to a mass market. When a new toy is introduced, it is likely that a sales promotion will be used e.g. a free gift, to encourage sales. Whether or not opening sales offices in more countries is likely to help them maintain profits is debatable. There will be significant expenses incurred in setting up new sales offices and they would have to be very successful to cover the costs. Makore Ltd should also keep a watchful eye on the level of expenses. It may increase sales revenue but if expenses rise more sharply, it will experience a fall in profits. Level 1 (1-3 marks) Has commented on one or more of the options with/without a recommendation. Makore Ltd should introduce new toys. Everyone wants the latest toy. It will maintain its profits. The toys must be well made and appeal to many people.